While there are “ample” natural gas reserves throughout North America, the cost of developing “frontier” projects is substantially greater than importing additional quantities of LNG from Trinidad, South America, Africa, the Middle East and Australia, the Zeus Development Corp. said.

From its conference in late June on “LNG’s Role in North American and Caribbean Gas Supply,” the executives of Zeus Development came up with broad conclusions concerning the industry going forward (see Daily GPI, July 2). Speakers from the Department of Energy, Ziff Energy and the Canadian Energy Board pointed out that as much as 1,300 Tcf of probable and possible gas reserves are located in frontier regions of the continent, including: the Gulf of Mexico, northwestern Canada, the North Slope of Alaska, offshore eastern Canada, coal seams in the Rockies and Appalachians, and other locations.

Some estimated that the number could reach 3,000 Tcf if “economical technologies” can be used to develop gas from deep water hydrates (ice crystals), tight sands and other non-conventional sources. Zeus Development said assuming North America consumes 25 to 30 Tcf per year, these frontier reserves could supply consumers for decades. But, because some of the hard to reach gas is uneconomical to develop currently, Zeus Development said LNG is expected to play a key role in North American gas supply.

Mary Hutzler, director of integrated analysis and forecasting at the U.S. Energy Department’s Energy Information Administration brought up a key example at the conference. She estimated the full cost of delivering gas from the North Slope to the northern border of the United States will significantly exceed $3/MMBtu and require 10 years to put the pipeline infrastructure in place. Similar estimates have been made for the Mackenzie Delta region and offshore Nova Scotia. Only deep Gulf reserves can be developed at a lower cost because gas development costs can be shared with significant oil production. Large coal basins, such as the San Juan, Appalachian and Powder River Basins, also can offer natural gas for less than the $3/MMBtu level.

LNG can be delivered from two existing plants in Trinidad and Nigeria for less than $2/MMBtu. Because of that fact, both plants are currently under sizeable expansion processes. Because liquefaction plants and regasification terminals are expensive, Zeus Development said opinions differed at the conference regarding the number of new receiving terminals that would be built in North America.

Three scenarios for new North American regasification terminals were discussed at the meeting: terminals on the U.S. coast; floating or man-made island terminals offshore; and terminals located in the Bahamas or Mexico. An El Paso Corp. executive said his company expects three, possibly four, new terminals will be built. One each on the Atlantic and Pacific coasts of Mexico, one in the Bahamas and one on the North Carolina coast.

Rob Bryngelson, managing director of business development at El Paso said at the conference that El Paso is most committed to developing a 500 MMcf/d-1,000 MMcf/d terminal on the east coast of Mexico in the town of Altamira, Tamaulipas. He said he expects it to be online by the first quarter of 2004.

Its second terminal, El Paso said, would be in the Bahamas. It would supply gas to Florida via an underwater pipeline. When asked if the Bahamas would need much gas from the proposed terminal, Bahamian Deputy Prime Minister Frank Watson said, “We’re a small country of about 300,000 people.”

Zeus Development said there is a race between Enron Corp., Gaz de France, AES Corp. and El Paso to build one or more terminals in the Bahamas. “For any LNG terminal, we will be primarily a gas transshipment point,” Watson noted at the conference. Another hot spot for new terminals is Tijuana, Mexico, where gas can be transported via pipeline into California. At least six developers have announced plans to build terminals there, Zeus Development said.

The conference showed that the major reason terminals are being cited out of country is due to public outcry. “In California, we’re hearing a new acronym for NIMBY [not in my backyard]; it’s ‘NOPE’ for ‘not on planet Earth,'” noted Steven Schneider, manager of business development at Chevron.

“Let me suggest you do a lot of local education before dropping a large stack of FERC filings on the table at a local library,” said Bob Arvedlund, chief of environmental review and compliance at the Federal Energy Regulatory Commission to a group of project developers at the conference. He added that the greatest challenge to siting a U.S. terminal would be gaining citizen support.

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